Problem 7-8 Dividend Discount Model (LO2) Rework Table 7.4 for horizon years 1, 2, 3, and 10, assuming that investors expect the dividend and the stock price to increase at only 6% a year and that each investor requires the same 12% expected return. The company will pay a dividend of $4.20 at the end of the first year. What value would an investor place on the stock? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Horizon (years) 1 2 3 10 Answer is not complete. PV (Terminal Price) 3.75 $ 65.63 PV (Dividends) $ Value per Share $ 70.00 70.00 70.00 70.00
Problem 7-8 Dividend Discount Model (LO2) Rework Table 7.4 for horizon years 1, 2, 3, and 10, assuming that investors expect the dividend and the stock price to increase at only 6% a year and that each investor requires the same 12% expected return. The company will pay a dividend of $4.20 at the end of the first year. What value would an investor place on the stock? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Horizon (years) 1 2 3 10 Answer is not complete. PV (Terminal Price) 3.75 $ 65.63 PV (Dividends) $ Value per Share $ 70.00 70.00 70.00 70.00
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![Problem 7-8 Dividend Discount Model (LO2)
Rework Table 7.4 for horizon years 1, 2, 3, and 10, assuming that investors expect the dividend and the stock price to increase at only
6% a year and that each investor requires the same 12% expected return. The company will pay a dividend of $4.20 at the end of the
first year.
What value would an investor place on the stock?
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Horizon
(years)
1
2
3
10
PV
(Dividends)
$
Answer is not complete.
PV
(Terminal
Price)
3.75 $
65.63
Value per
Share
$
70.00
70.00✔
70.00
70.00✔
TABLE 7.4 Value of Blue Skies.
PV (terminal
Horizon (years) PV (dividends)
price)
$ 2.68
$72.32
5.26
69.74
7.75
67.25
TTTT
22.87
52.13
38.76
36.24
49.81
62.83
73.02
1
2
3
10
20
30
50
100
25.19
12.17
1.98
Value per Share.
$75
75
75
75
75
75
75
75](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6c1b19ff-0877-4381-b945-46a1e90def6a%2Fee40c377-c2f8-4a7e-97ec-d96b802aacf9%2Fzzp2kkq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 7-8 Dividend Discount Model (LO2)
Rework Table 7.4 for horizon years 1, 2, 3, and 10, assuming that investors expect the dividend and the stock price to increase at only
6% a year and that each investor requires the same 12% expected return. The company will pay a dividend of $4.20 at the end of the
first year.
What value would an investor place on the stock?
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Horizon
(years)
1
2
3
10
PV
(Dividends)
$
Answer is not complete.
PV
(Terminal
Price)
3.75 $
65.63
Value per
Share
$
70.00
70.00✔
70.00
70.00✔
TABLE 7.4 Value of Blue Skies.
PV (terminal
Horizon (years) PV (dividends)
price)
$ 2.68
$72.32
5.26
69.74
7.75
67.25
TTTT
22.87
52.13
38.76
36.24
49.81
62.83
73.02
1
2
3
10
20
30
50
100
25.19
12.17
1.98
Value per Share.
$75
75
75
75
75
75
75
75
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